Corn leads grain plunge as U.S. reserve tops analysts estimates

Corn plunged the most since May, sparking a slump in soybeans and wheat, after the government said U.S. inventories were bigger than analysts forecast and that farmers will plant the most since 1936.

Inventories of corn on March 1 totaled 5.399 billion bushels in the U.S., the world’s biggest grower and exporter, the Department of Agriculture said today. While that’s down 10% from 2012 and a nine-year low, analysts expected 4.995 billion. Farmers will sow 97.282 million acres, up from 97.155 million in 2012 and the most in 77 years, the USDA said.

Prices this month jumped 4.5% before today and reached a seven-week high yesterday on concern that rising demand from makers of ethanol and animal feed would erode inventories before a record harvest arrives in September. After today’s USDA report, corn prices plunged the maximum allowed on the Chicago Board of Trade, while soybeans fell the most since September and wheat futures had their biggest drop since 2011.

“It comes down to two things -- the size of the crop and feed usage,” Arlan Suderman, a senior market analyst at Water Street Solutions Inc. in Peoria, Illinois, said in a telephone interview. “Maybe USDA underestimated the size of the crop and then feed usage came in less than expected.”

Corn futures for May delivery plunged by the exchange’s 40-cent limit, or 5.4%, to settle at $6.9525 a bushel as of 2 p.m. in Chicago, the biggest decline since May 22 and the lowest price since March 8. Trading was more than triple the average of the past 100 days.

Speculators

As of March 19, hedge funds and other speculators had boosted net-long positions, or bets that corn prices would rise, for three straight weeks to 145,535 futures and options contracts, the most since Feb. 5, U.S. Commodity Futures Trading Commission data show.

The government quarterly inventory reports have become harder to predict, resulting in more surprises and big price moves. In the six years prior to today, analysts’ estimates for March inventories missed the USDA tally by 123 million bushels on average, according to data compiled by Bloomberg. That’s enough corn to feed 15.4 million pigs, or 14% of the U.S. herd, until they are big enough to be sold for slaughter.

For the 11 quarters since June 2010, the average intraday price swing on the day of the USDA inventory report was 5.6%, with prices rising six times and falling five.